SEC Update on Winklevoss ETF: Higher Probability of Approval?

The Winklevoss Bitcoin ETF (COIN), which is to be either declined or approved by the Securities and Exchange Commission (SEC) on March 11, is seeing some progress that could result in the final approval.

On February 14, SEC officials, the Winklevoss twins, Bats global markets chief, State Street ETF products specialist, KCG Holdings global head and representatives of Division of Trading and Markets of the US SEC amongst other individuals participated in a roundtable discussion in regards to the approval of the ETF.

Before this meeting, analysts including Spencer Bogart, Vice President of Equity Research at Needham & Co, predicted that the approval of Bitcoin ETFs is unlikely and the probability of the approval is at 25 percent.

“We have pegged the odds at less than 25 percent. That is because the very first thing the SEC lists in its own mission statement is protecting the investing public. When you think about the game theory aspect of this, if I work at the SEC and I approve this ETF. and it goes well, nobody is probably going to come around and pat me on the back and give me a promotion. But if I approve it and a lot of money flows into it, and something goes wrong, I am likely to lose my job.”

However, the viewpoint of analysts and the public towards the approval of the COIN ETF has begun to change following a memorandum submitted by the Division of Trading and Markets of SEC entitled “Meeting with Representatives of Digital Asset Services, LLC, Bats Global Markets, etal.” which was released February 22.

The memorandum explicitly detailed a meeting between all relevant parties of the COIN ETF and the SEC who discussed some of the rule changes and alterations proposed by the Winklevoss Bitcoin Trust. The BitMEX Futures contracts on the COIN ETF approval were bid as high as 51.49, but have since retreated to 41.70 at the time of writing.

COIN ETF Administrator State Street, a financial services company with around $250 billion in assets, was appointed by the Winklevoss twins in October 2016, participated in the roundtable meeting attorneys and heads of the Division of Trading Markets that oversee broker-dealers and clearing agencies.

Usually, the SEC and relevant parties host these meetings before approval to discuss how the ETF will be implemented, launched and maintained in the public market. The presence and involvement of State Street will serve as a significant advantage for the Winklevoss twins and will likely to lead to the approval of the ETF because State Street oversees most of the world’s ETFs, including Spy and GLD.

Currently, the concerns of the SEC towards the implementation and introduction of a Bitcoin ETF is its legitimacy, flow of money and security. If State Street’s involvement can guarantee the legitimacy of the Winklevoss ETF, the approval process will likely end on a positive note.

One positive aspect of the meeting held on February 14 is the participation of quant traders from KCG and Susquehanna, who most likely have served as outside counsel or independent consultants to the SEC to offer their insights into how the trading of ETF will be handled.

The publicity of this meeting led to mainstream media coverage which drove the bitcoin price higher. CNBC highlighted that BTC-USD hit a record high price of $1,220 on talk of ETF approval. In an interview with CNBC, Insight fund manager and head of currency investment Paul Lambert stated:

“Bitcoin is just not liquid enough for us to even think about. We manage billions and billions of dollars we would need to be able to go into that market and trade in hundreds of millions of dollars at a time and my sense is it is not like that.”

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